Artificial intelligence in accounting and auditing: Some solutions for Vietnam

1 International Conference on Finance, Accounting and Auditing (ICFAA 2018) November 23rd, 2018 Hanoi City, Vietnam Artificial Intelligence in Accounting and Auditing: Some Solutions for Vietnam Nguyen Huu Anha aNational Economics University Submission day: 30/10/2018 Review day: 10/11/2018 Acceptance day: 15/11/2018 Abstract The rapid development of artificial intelligence in the fourth industrial revolution has challenged the whole society, especially in accounting and auditing fields. Accountants and auditors are responsible for preparing and examining the financial records of companies. With the trend of developing machine, there is software that has automated many accounting procedures such as recording, posting, analyzing, preparing report, tax and audit process. This paper introduces the present situation of the application of artificial intelligence in the field of accounting and audit services. After that, it provides some suggestions for accounting and auditing fields in the context of Vietnam. Keywords: Artificial intelligence, Accounting, Auditing 1. Introduction The fourth industrial revolution is occurring which is enabling businesses to operate in significantly different ways; enabling technologies include artificial intelligence, internetworked physical devices, cyber-physical systems, nanotechnology, and biotechnology. In which, the concept of artificial intelligence (AI) is directly related to accounting and auditing fields. It is not a new concept, it can be traced back from 1936, when Alan Turing first suggested the idea of the Touring Machine which was the basis for theories about computers. With the development of computers and program in the mid-20th century, artificial intelligence is officially supported. Untill now, robots or machines have not quite 2 taken over yet; however AI is presenting all over the fields, from personal digital assistants like Siri in Iphones, Google assistant to report writing to IBM Watson which is a question- answering computer system capable of answering questions . In other words, artificial intelligence is a computer system that can transform human wisdom into productive forces by means of technology (Razi and Madani, 2013) Through the application of artificial intelligence, the user can break the traditional information transmission process due to the transmission speed, cost and quality of a series of bottlenecks between the problems. Recent progress in AI has been based on techniques such as machine learning and deep learning, whereby algorithms learn how to do things, such as classify objects or predict values, through statistical analysis of large amounts of data, rather than through explicit programming. Therefore, AI can transform and disrupt all the sectors of the economy from technology to finance, communications, energy, healthcare or manufacturing, etc. Professional accountants and accounting practices, procedures, and processes will need to adapt, especially education and traning of professional accountants (Amin and Mohamed, 2016) 2. AI in Accounting The role of accountants is to apply their knowledge about accounting and finance to help business and stakeholders make better decisions. It means they need to capture, prepare, check and communicate information to analysis and make decisions. With technology improved, accountants can provide better and cheaper data to support decision-making; generate new insights from the analysis of data and saving time for other tasks such as strategy development, relationship building, etc. Up untill now, there are still limited use of AI in real-world accounting. The first application is using machine learning to code accounting entries and improve on the accuracy of rules-based approaches though accounting softwares, enabling greater automation of processes (McCabe, 2014). Secondly, accountant can detect quickly accounting fraud and some machine learning models can predict better fraudulent activities. Also, accountants can use machine learning-based predictive models to forecast revenues. As can be seen, accountants are encountering machine learning without realising it. In the future, AI can be applied better such as: in managerial accounting, big data will vastly improve effective management control systems and budgeting processes. In financial accounting big data will bring forth relevent accounting information, thereby enhancing transparency and stakeholder decision making. Besides, there is a concept of blockchain. Currently, business and consumers use a trusted party to make transactions like a bank. (McCabe, 2014). However, blockchain is used as a digital ledger worked by a network authorized computers. It helps customers and business connect directly. As a digital ledger, blockchain use cryptography to keep exchanges secure and show transactions that everyone on the network can see. 3. AI in Auditing Along with accounting session, artificial intelligence also apply to audit industry to improving the quality and efficiency of the audit. The development of data analytic system 3 enable the auditors to adjust better by transforming the traditional, sample based audit approach to centralized and data driven approaches (McCabe, 2014). For example: 100% data is tested by automated analytical algorithms instead of sample based testing. The artificial intelligence system automatically based on the auditor's prior requirements and the relevant knowledge stored in the system database. It divides several steps of reasoning and judgment, and examines the accounting data and other relevant information of the audited entity. It will automatically find out the existence of all kinds of errors, fraud, abnormal data and changes and other business related suspicious circumstances, presented to the audit staff by generating a list or audit opinion draft form. Artificial intelligence system enables auditors to quickly calculate and make decisions on audit projects, maximize the production benefits of audit services and reduce audit risk. The other development is the present of cloud based software platforms. It helps data to be stored and shared in the cloud, which also requires the cyber security capability in the audits. In the future, artificial intelligence will improve significantly in audit industry. For example: IBM Watson computer system are able to read, listen, learn and process billions of documents per minute. It means, this system can work with all the accounting standards, Generally Accepted Accounting Principles (US GAAP) or International financial Reporting Standards (IFRS), etc and generate the reports. This technology is still not developed, however there is clearly change upcoming. 4. Challenge of Vietnam accounting and auditing market in the fourth industrial revolution According to experts in the field of accounting and auditing, the Industrial Revolution 4.0 is accompanied by the vigorous development of information technology and artificial intelligence, so auditor audiences also become more complicated. This requires the audit company and the auditors to renew and upgrade themselves to meet new requirements in the performance of their duties. In Vietnam, the State Audit mainly audits on papers, however, the Industrial Revolution 4.0 will make the paper documents are no longer available. Auditors receive more information digitally nowadays, through PDF’s for instance, which facilitates their working methods. By using digital working methods and not paper files, they gain advantages such as flexibility and efficiency. They no longer have to carry multiple binders with them, only the computer and possibly scanners and extra computer screens. This allows a freedom to be able to work outside of the office without having to make sure they have all of the binders with them, which makes it easier for the auditors. The good news is that in the Law on Accounting 2015 of the National Assembly and the Government's Decree No. 174/2016 / ND-CP dated 30/12/2016 detailing a number of articles of the Law on Accounting has related provisions about Accounting documents stored on electronic media (electronic documents, electronic invoices ...). This is also the basic requirement for accounting and auditing during the Industrial Revolution 4.0. However, risk of information, data loss through the Internet connection is also an important issue that management agencies and businesses need to pay attention. Information and audit results may be leaked from emails sending to the audited entities or outside organizations and individuals exchanged via the shared network. Hackers can take advantage 4 of informal, unofficial auditing results to carry out destructive or pervasive purposes, which can adversely affect badly the image of audit company. At the same time, the quality of IT infrastructure across the accounting and auditing industry generally does not meet the requirements, especially on network security. Beside the tools changed, working methods also are being changed into a digital method of work. More digital communication on for instance email rather than actual meetings can affect the relationship between the auditor and the client. As a result, it can be perceived that the relationship becomes even more important and relevant to maintain than before due to the paperless working methods 5. Suggestion and conclusion The Industrial Revolution 4.0 requires government to better prepare their IT infrastructure to keep up with the technology. Accountants and auditors must also improve their IT skills to meet the requirements of the jobs. In the field of auditing, auditing activities in general and the State Audit of Vietnam in particular perform the function of checking, assessing and certifying the reliability of economic and financial information processed by accountants. As a result, changes in procedures, procedures for handling and analyzing information as well as the presenting information in the financial report in the context of the Industrial Revolution 4.0 also require the State Audit to innovate the audit process as well as the use of audit methods. Secondly, effective and appropriate methods of auditing should be studied and applied in the context of the impact of the Industrial Revolution 4.0. Specifically, methods of collecting, evaluating audit evidence, technical analysis methods in the context of accounting profession using electronic voucher, blockchain technology, cloud computing should be developed. Thirdly, business ensure safety in the management of network security. The Industrial Revolution 4.0 has pushed up the level of information sharing, thus creating a huge need for cybersecurity. The accounting and auditing authorities should pay special attention to building a data center; upgrade high and multi layer security system, ensure the expansion of the scope of activities is stable and safe. The competition for high quality human resources in the accounting and auditing sector will be more drastic because at that time the demand for human resources is not only about comprehensive knowledge but also the level of using technology at a very high level. Auditing companies will have difficulties retaining the key employees who have been trained, experienced, especially those who have international certificates, well meet the requirements of large organizations and groups inside and outside due to competition from other countries. Requirements from the integration and the Industrial Revolution 4.0 require that the programs, content and methods of training bachelor's degree in accounting and auditing at the universities must have an innovation. Training institutions should study and analyze the 5 characteristics of this revolution to propose and recommend innovations in all aspects. It is necessary to continue to improve the quality of the curriculum with the knowledge that is associated with the development trend of the Industrial Revolution 4.0. Universities need to apply virtual accounting and audit model to simulate and practice skills for students. When software, electronic vouchers, electronic signatures, calculations have been programmed and automated, the traditional accounting and auditing teaching methods according will be abandoned. 6. Reference: Razi, M. and Madani, H. “An analysis of attributes that impact adoption of audit software: an empirical study in Saudi Arabia”, International Journal of Accounting & Information Management, vol 21 (2013) 170-188. A Salary Guide Foresees a Cheery Future for Accounting and Finance Professionals. (2014). Accounting & Financial Women’s Alliance. Amin, H. and Mohamed, E. “Auditors’ perceptions of the impact of continuous auditing on the quality of Internet reported financial information in Egypt”, Managerial Auditing Journal. 31 (2016) 111-132. McCabe, S. (2014). CPA.com study gauges firms’ preparedness for the future. Accounting Tomorrow. gauges firms-readiness-for-thefuture-73011-1.html